Iowa Gov. Terry Branstad has joined with Ben Milne, founder ofDes Moines-based Dwolla, in announcing that the state's businessescan now pay their cigarette stamp taxes electronically viaDwolla.

Some $100 million in cigarette stamp taxes is paid annually byIowa businesses.

“Dwolla is a safe, secure payment method, and we are proud as astate to be partnering with such a great Iowa company,” saidBranstad in a press statement. “This new method is an efficient,effective means of payment for Iowa taxpayers, and I look forwardto expanding this service into additional areas within stategovernment.”

Up until now the only way businesses had to pay these taxes waswith a check, Jordan Lampe, a Dwollaspokesman, said in an interview. Payees will pick up Dwolla's 25cents per payment fee but, noted Lampe, that is less than the costof a postage stamp.

Because no costs are absorbed by the government, Iowa was notrequired to issue an RFP and go through a protracted bid process.As a result, this deal came together “very quickly,” said Lampe,who elaborated that the Iowa governor had made public commitmentsto cost cutting and the Dwolla electronic payment option allows thegovernment to collect taxes at lower costs than processing paperchecks. Businesses, for their part, will also get their taxstamps quicker.

“The number of state and federal payments are in the billionswith transactions totaling in the trillions, meaning even afraction of savings could have a profound effect on the economy.”said Milne, Dwolla's CEO, in a statement. “This partnership isabout creating a more sustainable, responsive and convenientbusiness climate for the state and its taxpayers, both today andtomorrow.”

The joint Dwolla-state government announcement elaborated: “Fromcollecting property taxes to issuing refunds, from renewing vehicleregistrations to paying government contractors, Branstad [said] thestate will be identifying the potential impact Dwolla's open,social, online and mobile payment technologies could have on everylevel of state government.”

Dwolla, with backing from The Members Group, has announced a string of integrations withcredit unions as a person-to-person payments tool.

Dwolla indicated it was in talks with other governments aboutoffering payments tools to their citizens, but also said revealingdetails was premature.